The Legal Strategy Behind Crypto Exchange Backpack's Token-to-Equity Program
Backpack plans to launch a token that allows users to earn equity in the exchange, prompting industry-wide questions about how it avoids being classified as a security. To address regulatory concerns, Backpack separates the token from equity rights by tying any conversion privileges to a VIP program, not the token itself. Users must actively participate on the exchange and lock up tokens for a year to access VIP benefits, effectively isolating the token from equity attributes. Backpack is pursuing this legal structure while raising $50 million at a $1 billion valuation and attracting SPAC and banking interest for a possible public listing. As a backup, Backpack may register the tokens as securities during an IPO if regulators require it. Co-founder Can Sun believes this approach, inspired by previous SEC discussions about tokenized shares, will satisfy regulatory requirements but acknowledges that Coinbase ultimately abandoned a similar concept.
